Murphy Oil Corporation

Good morning, ladies and gentlemen, and welcome to the Murphy Oil Corporation third quarter 2020 earnings conference call. If at any time during this call you need assistance, please press star zero for the operator. I would now like to turn the conference over to Kelly Whitley, Vice President, Investor Relations and Communications. Please go ahead.

Thank you. Good morning everyone and thank you for joining us on our third quarter earnings call today. Joining us is Roger Jenkins, President and Chief Executive Officer, along with David Looney, Executive Vice President and Chief Financial Officer, and Eric Hambly, Executive Vice President, Operations. Please refer to the informational slides we've placed on the investor relations section of our website as you follow along our webcast today. Throughout today's call, production numbers, reserves, and financial amounts are adjusted to exclude non-controlling interest in the Gulf of Mexico. Please keep in mind that some of the comments made during this call will be considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. As such, no assurance can be given that these events will occur or that the projections will be attained. A variety of factors exist that may cause actual results to differ. For further discussion of risk factors, see Murphy's 2019 Annual Report on Form 10-K on file with the SEC. Murphy takes no duty to publicly update or revise any forward-looking statements. I will now turn the call over to Roger.

Thank you, Kelly. Good morning, everyone, and thanks for listening to our call today. We continue to successfully execute our focus strategy, and Murphy remains steadfast with the goal of keeping a strong balance sheet through the commodity price cycles and plan to allocate free cash flow to reduce overall debt levels and an oil price recovery. Despite the record-breaking hurricane season this quarter, we still achieve free cash flow above our dividend. Our third quarter results were helped by the flexibility and strength of a multi-basin portfolio as production from our oil-weighted offshore and onshore plays continue to see higher margins driven by lower cost structure. We know that to remain in business over the long term, we must operate in a conscientious manner, protecting and supporting not only our employees, but the areas in which we work. As disclosed in our recent 2020 sustainability report, I'm proud to say we have proactively established a greenhouse gas emission intensity reduction target of 15 to 20 percent by 2030. We're further advancing our diversity inclusion programs and practices. A multi-basin portfolio provides additional risk reduction and flexibility. We remain committed to our focused exploration portfolio. and our partners as we see it as an ability to deliver company-making resource upside to our shareholders. On to slide three. Looking back on the quarter, Murphy produced 153,000 barrel equivalents per day with 86,000 barrels of oil per day. Production was significantly impacted by historical Gulf of Mexico storm season resulting in 12,000 barrels equivalents per day shut in compared to our guidance of just under 5,000 barrels equivalent per day. This impact was partially offset with stronger performance in our onshore business. We spent approximately $120 million of accrued capex in the quarter, including $19 million for the construction of the Kings Key floating facility. Our various oil pricing points traded closer to WTI in the quarter than usual due again to the unique storm season. This led to a realized oil price of nearly $40 per barrel on par with WTI. I realize natural gas price continues to improve at $1.78 per 1,000 cubic feet in the U.S. Further in the Tupper Montany, the ACO Henry Hub basis differentials have reduced and tightened due to improving market access from infrastructure build-outs and less capital spent in the region by our peers. I'm going to now turn over to discuss the financials with our CFO, David Looney.

Thank you, Roger, and good morning. Slide four. Like our peers, ongoing low oil prices continued to affect our business, resulting in a net loss of $244 million or negative $1.59 per diluted share for the third quarter. Several non-cash charges impacted earnings for the quarter, including after-tax impairments of $146 million, primarily related to the Cascade and Chinook field in the Gulf of Mexico, non-cash mark-to-market loss on crude oil derivatives and contingent consideration of $66 million and restructuring expenses and unutilized rig charges of $8 million. After backing out these items, Murphy had an adjusted net loss of $24 million or negative 15 cents per diluted share. Slide five. With oil prices off their record lows, our net cash provided by continuing operations improved to $209 million in the third quarter, including a cash outflow of $28 million due to a working capital increase. When combined with property additions and dry hill costs of $134 million, including $23 million for Kings Key, we had positive free cash flow of $74 million in the quarter. Thank you for joining us today. Our G&A expenses continue to trend in the right direction and we remain on track for achieving approximately $100 million in total G&A reductions between 2019 and 2020. Lastly, Murphy has taken additional action to protect its future cash flow with additional 2021 crude oil hedges as well as fixed price forward sales contracts for a portion of our Tupper Montney production through 2024. Slide 6. Liquidity is a key tenant of our business, and we have maintained a strong balance sheet with $1.4 billion available under our $1.6 billion senior unsecured credit facility, as well as $220 million of cash and equivalents as of quarter end. Murphy remains focused on reducing our total debt level with excess cash flow, including our next maturity in mid-2022. This will give the company even further resilience in commodity price cycles. As stated last quarter, our goal remains to have, at year end, nearly the same level of liquidity as we did at the beginning of the year. With that, I will turn it back over to Roger.

Thank you, David. On slide 8, MRF is a long history of protecting our environment, employees, and all of our stakeholders, achieved in part through our strong corporate governance processes. We continue to achieve low spill and recordable incident metrics while also reducing our environmental impact with flaring reductions and increased water recycling. We've also expanded our internal diversity inclusion practices and programs and maintain a program to aid impact employees in times of need through our Disaster Relief Foundation, which is taking place now as we're impacted by hurricanes, our employees on the Gulf Coast. Our operations team has made ongoing efforts to reduce our environmental impact while lowering costs through the changes such as electrification of our frac fleet and opening a remote operating center for managing all onshore Canadian operations. Overall, these small changes add up to a larger, longer impact by reducing downtime and costs and improving the efficiency of our field employees. Additionally, we utilize bi-fuel hydraulic frac spreads, for all well completions in Canada this year which resulted in considerable CO2 emissions reductions. On slide nine, we recently released our 2020 sustainability report which features expanded disclosures and metrics and more closely aligns to various reporting frameworks including TCFD and SASB. A key highlight of our goal is reducing greenhouse gas emissions intensity by 15 to 20% by 2030 from 2019 levels. This report also outlines diversity disclosures, workforce development, and employee engagement programs. Murphy's also expanded our HSE board committee to include the oversight of corporate responsibility. We formed an ESG executive management committee and created a new director of sustainability role. We will continue to evolve and advance our sustainability efforts. On slide 11, like most peers, Murphy's taken deliberate actions to have a sustainable business in the new energy landscape. Prior to COVID, we streamlined our portfolio to high-margin, oil-weighted assets through accretive deals. We refinanced certain bonds last year and are maintaining our liquidity with manageable debt structure. Post-COVID, we continue streamlining and reducing costs with adjustments in capital and dividends. We maintain operations in multiple basins with focused exploration opportunities in certain countries outside the United States, providing us with portfolio diversification for long-term resilience. Slide 13, looking at our Eagleford Shale business. The asset produced near 35,000 barrels equivalent today in the quarter, which is ahead of our guidance. We continue to see improvements in our base well performance. and have established low decline rates. We're utilizing our remote operation center and operating model to lower downtime in wells and facilities while optimizing artificial lift performance. Production from the wells brought online prior to 2019 delivered over 20,000 barrel equipment today in this quarter demonstrated less than 14% decline over the prior 12 month period. We anticipate 2021 base decline of just 22% for our Eagleford asset. This is a significant improvement in base decline for the Eagleford. On slide 14, Murphy produced 13,000 barrels of equipment per day in the K-Bob in the quarter with four wells on line. This asset continues to show strong well performance with tightening differentials and is achieving higher cash flow metrics. Our team has done a tremendous job improving the efficiencies across our onshore business. Our new remote operating center in Fox Creek, Canada, manages all onshore Canada production activity and well performance, which will enable us to reduce downtime and costs through more expedient repairs. Slide 15. Our Tupper Montney wells produce $235 million per day in the quarter and continue to generate positive free cash for the year. Since our last earnings call, Murphy has added fixed price forward sale contracts in ACO and at the Millen Hub through 2024, locking in further price protection. As stated earlier, we have seen improving basis differentials and higher prices coupled with higher EURs and strong execution ability. Slide 17 in the Gulf. Burford produced 59,000 barrels equivalent per day in the Gulf of Mexico this quarter, which is negatively impacted by record-breaking storm downtime of 12,000 barrels equivalent per day. It's also caused a delay in achieving first soil at Calliope, which is now scheduled to produce in the second quarter of 21. The non-operated Kodiak and Lucius wells remain on schedule, with Kodiak executing later this year. Lucius Drilling is ongoing with strong results in the first well of the program. Slide 18, our long-term projects. Our Khaleesi, Moorman, and Samurai projects in non-operated St. Malo water flood development remain on schedule. Construction in Kings Key Floating Production System has advanced and is approximately 77% complete, with mid-22 remaining as a target for first oil. At this time, we've submitted all permits for the Khaleesi, Moorman, and Samurai projects. We're excited to launch the drilling campaign in second quarter 21 and take the next step toward first oil. Two rigs are presently drilling at the St. Milo Water Flood Project and the first producer well has shown results to plan. In exploration on slide 20, we continue to progress our various exploration projects as we maintain optionality across our diversified portfolio. This quarter, our operating partners flood the High Garden Well in the Gulf of Mexico and has encountered delays in drilling due to the significant storm season. Our Vietnam plans move forward with partners signing the Joint Operating Agreement on Block 15-2. remain excited for the opportunities ahead with more than 900 million barrels of oil equivalent of net risk resources across our exploration portfolio. And 22 on our future plans. For the fourth quarter, we anticipate production in the range of 146,000 to 154,000 equivalents per day. Guidance is impacted by two factors, actual storm downtime earlier this quarter of 8,000 barrels equivalents per day and a planned downtime of some 6,000 equivalents per day as well. We maintain our full year 2020 capital expenditure guidance of $680 to $720 million and note that $649 million has been spent through the third quarter. Additionally, we're on track to reduce full-year G&A expenses by $100 million in 2020 and improve our liquidity position by paying down our revolving balance. We maintain a deep-rooted safety culture at Murphy, leading to strong HSE performance throughout 2020, including safety protocols established early in the year to protect our employees and contractors from COVID-19. have made significant progress on our long-term Gulf of Mexico projects this year. At this time, all permits submitted for approval in advance of our campaign launching next year. Meanwhile, our onshore team is preparing to launch our 2021 Eagle Ford drilling program. Going forward, as previously stated, we plan to maintain a flatter production profile of the 150,000 to 160,000 barrel equivalents range with capex in line with 2020 spending for 2021. Our focus remains on cash flow capex parity after dividend with debt reduction in a price recovery. As noted in our 2020 sustainability report, we're even more focused on having sustainable and transparent operations, including our proactive goal of reducing greenhouse gas emissions intensity. We will continue to allocate capital to our unique exploration program. In closing, I'd like to thank our talented group of employees for their innovation and dedication this year in light of all the challenges we've faced. I'd like to turn the call over back to the operator for our question period. I appreciate you this morning. Thank you.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by 1 on your touchtone phone. You'll hear a three-tone prompt acknowledging your request and your questions will be polled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment for your first question. Okay, so your first question comes from Duncan McIntosh from Johnson Rice. Duncan, please go ahead.

My first question would be on 21. Nothing's changed versus what you messaged on the second quarter, but what are some of the things that you all could do that might put you more towards the higher or the lower end of that 150 to 160?

Well, really, we feel real good about that. We're working toward that. I think our main focus is to stay with that range and get our capex in a way where we can have recovery prices and have more free cash flow and debt. So really not that interested in moving it up and down. The assets that we have today, clearly for this quarter, with the guidance that we have, you could put on top of that the... The production we have already lost for this significant hurricane season. We have a pretty robust set of production going into the year. And then we're really looking at executing that and not really wanting to do any levers to move it up or down. So I feel good about hitting that target. I have to keep in mind too that we have Almost $300 million set aside for capital for Khaleesi, Moormont, Samurai, and St. Malo. So the production that we have and the capex we have for cash flow, capex parity to pay our dividend and stay in our liquidity is our main focus rather than production increases at this time, Duncan.

Okay, thank you very much. And then, since I know it'll get asked anyway, on King's Key and the sell-down process, any update there? Are things still progressing? And there's the slide I've been taking out to just kind of how y'all are thinking about that now.

Yeah, I'm going to talk about that, and thanks for asking that and get that over with here. On Kings Key, really, I made a mistake that I rarely, if ever, make in business development. We've done a lot of business development here at this company, and that's commenting on a closing timing of a business and making this the way that's negotiated. And I'm not going to be doing that further, but I will say that it is progressing. Kings Key continues to progress. There was an email on my phone before walking in here, but naturally I'm focusing on this meeting at this time. Kings Key is a very valuable midstream asset for our company. It's an asset that's completely almost de-risked. It's been built through COVID in Korea, which is no easy task by our team. It's built through significant typhoon season that hit that project as well twice and is now 80% complete. Kings Key is going to sit on top of a very valuable field at Khaleesi Moormont that's been previously drilled that we purchased. So its value has not diminished at all with this closing delay. So where we are, there's two groups involved with this closing, an owner's group and a producing group. With our owner's group, we made a clear directional path forward there. And we're now working with our producing group toward closing. So pleased with the work and progress. It's a good de-risked asset. We're progressing and selling it. I'm just not getting involved with the date of all that here, Duncan, to be honest with you.

Yes, sir. All right. Well, I appreciate it. Thank you all.

No problem. Thank you for asking.

Your next question comes from Neil Digman from True Securities. Neil, please go ahead.

Morning, Roger. Could you give detail? I don't know, Roger, if you can say too much on this, just on that green can, 895. I know obviously... Sorry, I'm having trouble. Hang on.

I'm having a little trouble talking. Just a little bit slower for me here.

Sure, I just was wondering on Green Canyon 895, you know, I know there's been storms and such. Anything you could talk on timing, et cetera, on it?

No, this is a rig operated by another partner. It's an experienced partner that we know well. They've had downtime with the rig due to pulling the riser and various things that happens in typical offshore exploration in the Gulf this time of year. And we're in the middle of recovering from the last storm. and getting set up back on the rig to kind of know where we're going forward. We progressed the well drill through salt and made a lot of significant progress, but it's really held up for hurricane reasons primarily right now, as would be the case with almost any rig operation conducted this quarter in the Gulf.

And then just for a follow-up, I was wondering on Canadian production, a nice increase in the third quarter, I think about 6%. It's Canadian, I should say, onshore production. Could you give comments on there? Do you think that could continue in that regard or anything you could talk about the onshore Canada?

Well, our Canadian operations are going extremely well. We also have to keep in mind that sometimes it kind of glosses by all the significant events that's happened in this company. Like we closed our office there. We're working it now in Houston. You see in my comments today that we set up this remote operating center. And to continue with these incredible results is really outstanding considering what all we've done on the G&A side and the office moving. These assets, Duvernay Shale is performing extremely well right now and gives us a lot of flexibility on all kinds of things in our company for the future. The wells are performing better this year than we thought. We're hitting above guidance in the asset. The pricing there has gotten just below at times of the Eagle Ford due to a lot of weird differentials going on in the Gulf Coast and a lack of capital being spent in Canada in general. So these assets are doing well. Also, Montney doing extremely well on decline rates. And we mentioned in our script today all this focus with these operating centers on this small amounts of downtime improvement, but big significant improvement in Eagle Ford to improve the base. So Eric and his team with limited capital are spending a lot of time focusing on base production. As I mentioned, the Eagleford has very low base decline, lower than we've ever had. Tupper is no different. And Duvernay is just a smaller asset. But it makes 13,000 barrels a day at prices just below the Eagleford. There's a lot of unique things going on in Canada around gas up there right now. I don't know if people are paying attention to this. It's quite on the outer realm. But ACO has been very positive. There's been a lot of de-bottlenecking and things that were talked about a few years ago. Almost 1.5 BCF of additional new gas is the supply availability in pipes by 2022. The supply in the country has declined 2 BCF a day due to COVID investing. Thank you very much. Thank you. Your next question comes from Gail Nicholson from Stevens. Gail, please go ahead.

Good morning, Roger. You guys have done a really nice job with LOE, both in the GOM as well as the Eagleford. Looking at the Eagleford, with the artificial lift optimization, the facility optimization that you guys are doing that lowers the baseline, does that also have a positive development potentially on LOE going forward?

Yeah, I'm going to let Eric, Eric's taken all that glory, and I'm going to let him answer that question for you.

Yeah, it's a great question. Obviously, the more we can get production from our base and continue to lower our operating costs, the stronger performance we have on free cash flow. We're pretty happy with Eagleford having just over $8 of BOE OPEX in the third quarter. are per BOE OPEX and Eagleford is, of course, dependent a fair bit on capital allocation going forward. So we aren't giving a lot of focus on what 2021 looks like, but we are working very hard as an operations team to continue to maximize production and minimize spending, and I'm really happy with how my team's done on that.

But also keep in mind, Gail, that these overall OPEX levels for us this quarter are good with a bunch of the golf shut down. That's also hard to do on a per BOE basis, very hard to do.

Yes, I was going to mention that. I was wondering if the $10 and change number per BOE is a good run rate to use in the golf going forward, or when we return to a normalized rate x downtime, if that will likely be better x workovers.

It's going to be in that range, but ex-workovers, I think we're in really good shape on OpEx and Gulf, doing really well there, and working on a bunch of plans to improve it.

Great. And then, Roger, you guys have submitted all the permits for Khaleesi, Mormont, and Samurai. Can you just talk about what's the next piece of the puzzle? Is it approval or just the standpoint of any clarity on timing of that?

Well, you know, there's a lot of, as you can imagine, complexity around that with a lot of yakking, really, on the administration change. BSEE and BOEM are parts of the Department of Interior and continue to operate through all administrations. We hope to gain our approvals. We'd like to gain those approvals in January, as you would anticipate, before January 21. Working toward doing that, you have to get them in and submit them. There's quite a bear of documentation there that we have to go through. So we got that in, and we own these assets. We have a right to these assets. All this yakking and talking about differing things, it's really not known at this time, of course. We feel really good about our position. We've gone through a lot of A lot of presidents in 70 years and a lot of different things. This administration that's coming in was also part of a tried attempt to stop drilling in Macondo. We very much understand what was called upon then. You have to keep in mind these fields are already drilled, which is an advantage where the completion is different than a drilling permit. Keep in mind that what drilling is to be done is in known pressure regimes, which gets away of some of these issues put on us post-Macondo by the prior administration. All these things we're very aware of, we're very knowledgeable about, and going through and working all of our options. And again, on all those things, Murphy always has another thing to go to. Outstanding Canadian assets, thousands of locations in the Eagleford, exploration out of the United States. So very rarely find us all in one ball there, one ball. So that's our situation, Gail, as you know.

Wonderful. And then just from the standpoint of the 2022 notes, you know, you guys have an undrawn credit facility, cash on hand, you know, have the flexibility to adjust budgets, make sure you generate free cash in 21. Just an updated thoughts on how you guys are thinking about those upcoming maturities.

Yeah, Gail, this is David Looney talking. I mean, obviously, we have a total of $578 million coming due in 2022. It's about not quite evenly split between June and December. You know, we obviously keep an eye on the bond markets and, you know, candidly, where the bond markets are today and where our paper is currently trading is certainly not anything that's attractive to us today. But as we've seen over the last several years, there's a high correlation, I think, between where our bonds trade and what oil prices look like, et cetera. So we don't have to do anything immediately, obviously. We still have in excess of a year and a half, 18 months before that first maturity. So we look at that. As you point out, we do have plenty of availability on the revolver. The bond market didn't come back to us, if you will, over the next 18 months to two years. That is an option, but obviously we look at it, we watch it, and we try to be opportunistic.

Great. Thank you so much.

Thanks, Gail. Appreciate it. Your next question comes from Roger Reed from Wells Fargo. Roger, please go ahead.

Good morning, Roger. How are you doing?

Doing well, Roger. Good morning to you. I guess a couple things I'd like to make sure I understand a little better. You mentioned a couple different times Eagleford Shell well base declines have really, I don't know if we call them shallow out at 22%, but certainly better than what we typically see. I just wondered what all is factored in there. Is that a larger base of truly mature wells that are declining slower or something you've done different in terms of choking back production early on or a combination of factors?

Well, what we've really done is kind of right-sized this asset around $30,000 a day going forward, a really low maintenance charge to do that, capex. And that's really what we're doing. And I'll let Eric expand further than that for you, Roger.

Sure. I mean, we have a natural phenomenon with the shale oil wells that have a shallowing decline through time. If you look at our Eagleford this year and what our thoughts are in terms of the base performance next year, with a fairly limited capital allocation to Eagleford in 2020, we have less production from high decline rate. We've established, as we comment on our slide deck, A 20,000 barrel a day piece of our business from Wellsboro Online prior to 2019 that has demonstrated very shallow declines, which of course we expect to continue to shallow going forward. So our focus on managing our base, on limiting downtime, on maximizing production, on increasing well performance through artificial lift optimization allows us to shallow out our decline even more than sort of the natural phenomenon. And we've been happy to see that performance over the last 12 months or so and expected to continue going forward as the wells naturally shallow up and decline as well.

It is an all of the above process is really the right way to think about it.

That's correct. Everything you said.

All right, then I don't know which one of y'all wants to take this, but on the CFO parity for dividend and CapEx, you had also a desire to pay down the debt that's out on the revolver. I'm just curious, you know, where does the extra cash come from to pay down the revolver? Like, is this based on oil at 40 for parity, 45? You're going to move it around as oil prices move around just a little more?

Well, as I said, and not really getting into it today, Roger, I'm sure you can understand why, but when we sell down this asset, it will take our revolver to zero, this midstream asset that we have, Kings Key. And if not, that would stay on there in a low 40 world. because we're cash flow capex parity with dividend otherwise. And then we would make another arrangement on selling that, if you will, if we need to or want to. We would still have very good liquidity even with that remaining because the project is almost built. So that's the issue there, Roger.

Okay. Appreciate it. Thanks, guys.

Thank you.

Your next question comes from Leo Mariani from KeyBank. Leo, please go ahead. Leo, good morning. How you doing?

Hey, morning here, guys. Just to follow up on that last comment you made there with respect to the King's Key, you said that the project is, you know, 80% built, you know, at this point. So I guess just in the event that, you know, this deal doesn't go through, what would be kind of the remaining King's Key spend that you'd have to put in place in 21? I'm getting the sense there's probably not a lot left here.

I would say that number is probably less than 100%. in the 70 range. It's going very well. We have a team there on the ground today, and we're executing that well, and it's an asset that is valuable to be sold to someone. I'm not concerned of that, but I'm not really negotiating that here anymore, Leo.

Yep, understood. Okay.

We have a lot of flexibility around it. You can see in our debt and our free cash flow we almost made Enough free cash flow this quarter for that. So we're doing really well with our operations, really well with our GNA, really well with our LOE. Even through these storms, because of our diversity and our other assets outperforming, we're very well positioned to take on what we need in these assets where we work and, of course, have plans to have any outcome involved with that if we need to.

Okay. Understood. And I guess I just wanted to get a sense, I know you guys are talking about kind of restarting the Eagle Ford operating program next year. Is that something that's going to hit the ground running pretty early with a couple rigs in early 21? What can you kind of tell us about the way you're looking at the...

Well, we have to keep in mind we have to meet with our board and improve our budget in December. We still have to do that. You know, I notice where people do their budgets almost a year ahead. Like, as soon as you do your budget, you do the next budget, which is quite a phenomenon we have going out there. So we have to do that, but we have ducks to do in Eagle for probably 14 to 15 of them. I see Eric nodding his head in the affirmative there. And we have ducts to do and some drilling to do. We've got plenty of wells to do with 1,000 locations there. But again, that asset's performing very well on the base. That asset's toning in well at a flatter profile with a little maintenance capex going forward, a lot of flexibility. And of course, like most operators, I would anticipate a front-end loading of operations in the year. I don't think we'll be uncommon in that regard.

Okay, and I guess maybe just on Mexico, certainly I think you guys have been talking about a couple wells, you know, next year at a minimum. You know, just trying to get a sense of where you are in that process. I know you've got some partners to kind of negotiate with, but, you know, is that something we could potentially see start drilling first half of next year? Do you think it's more second half? What are you going to tell us about Mexico?

We're in the middle of our partners on the budgeting there, as you can imagine. That's Things that you have to take in close regard these days with these type of prices. I would anticipate it late next year. We have two very nice, very large prospects there that are coming out of the multitude of options we have there. Also, we're very excited about our Brazil wells and the budgeting of that with our partner ExxonMobil. That will be about a second half spud as well. So a nice second half year type of opportunities there for us, Leo, and our diverse business that we have.

Okay, that's very helpful. I appreciate it.

No, thank you.

Ladies and gentlemen, as a reminder, should you have a question, please press star followed by one. and your next question comes from Josh Silverstein from Wolf Research. Josh, please go ahead.

Good morning, guys. Just on the Kinski transaction here, you know, you highlighted the value of the project completion date. I'm just wondering, flipping this around, given how far along it is, would you actually consider keeping it at this point? It doesn't seem like you want to do that, but could that potentially be on the table?

Really trying not to negotiate it here, Josh, as I said. We can do that. We can afford to do that. We have all the ability to do that. We have decided to go down this road. We've progressed the road a long way. and continuing to progress that. It's just a delay in the closing timing so far is really the issue. And putting out additional dates on that is not helping the matter at all. And continue to progress toward the original goal, but we have ultimate flexibility to do anything we need here. But the goal is still to do it, and as long as we're progressing, as I'm saying, then we're gonna continue on with that until it no longer progresses, of course. But that's not the case today.

Gotcha, sure enough. And then... No problem. I wasn't sure if this never came up before. I think it was asked a couple of questions ago. But as far as the volume guidance and spending for roughly kind of flattish around $700 million year over year, what's the break-even that you guys have on crude oil and gas price? I know there's a little bit of flexibility to shift capital around, but what was the... Break-even in what way, Josh? A cash flow break even.

With dividend or with capital?

With a posted dividend.

Oh, in low 40s, very low 40s. Below 42. No problem. Appreciate your call.

Your next question comes from Arun Drum of JP Morgan. Please go ahead. Rune, welcome in, your last one today.

Hey, Roger, how are you, sir? Doing great. Yeah, Roger, I was wondering if you could give us, and again, I apologize, I'm dialing in a bit late, but I was wondering if you could give us an update on the development program at Khaleesi Moormont and, you know, confidence in delivering on that. Is it first half? Is it 22 production outlook?

Yeah, well, first step, the facility, which is going very well. We are very experienced at building and constructing these things. That's another thing. We are in charge of that. And the asset that we own, we're also the operator in building it. So that's a big advantage, a hell of an advantage. And so then it really becomes the wells that are drilled, Calise-Mormont, Samurai will require some additional drilling. Calise-Mormont is greatly de-risked by, I think, I mean, wellbore penetration is seven wellbore penetrations in six wells that are cased there. And we have, you know, the wells are pay on log. We have the reserves third party. So we need to get out there and do the completions. It's real important to differentiate between completion and drilling permits if we want to have the, you know, concern about some of these political matters and things of that nature, which we're very astute about. and knowledgeable of. And so it's an asset that's set up to perform and go forward. And we really, we have the rig contracted. That's also important in the permitting. That's become more specific through the years. And I'm real pleased about, you know, just executing like we do all of our business. And we've executed many deep water, different kinds of wells and projects all over the world. And this one's in line. I'm very pleased with my team and we're doing well.

Okay. Roger, my second question is just a little bit more maybe color or clarification on Mexico and Brazil next year. Does the Mexico plan include the Cholula appraisal or are you drilling some rank exploration wells? And then you're saying that in Brazil you could spud a well in the second half of 21?

Yes, that's correct. Well, we're not spotting it. Our operator, ExxonMobil, is. Exxon, yes. Yes. And in Mexico, we have a call between Cholula has an appraisal program approved by the government there. We do not have to execute on it. We have time. Or we can drill a larger structure, a larger subsalt structure, which has been de-risked by some other wells in that region, a much larger structure. Prospect, if you will, that we may lean toward. But we're working with our partners now on the timing and what to choose between those two at this time. We at Murphy are leaning toward the larger opportunity.

These are in your Bladish CAPEX guide, right?

Or outlook, I should say. Also, be clear on the CAPEX. For next year, We're guiding a capex similar to this year. I think it's trending slightly lower than the midpoint of 2020 at this time. And also the 22 capex would be similar. And after that, it's much lower capex and significant free cash flow coming out of this business. as the offshore projects come on. So this idea that we'll have that capex forever, it really isn't our point we're trying to make in this long-term guidance. 21 and 22 are the higher capex levels by far, absent some incredible exploration success in our business.

Okay. I got one more, Roger, if I could sneak one more in. You did note that most of your debt maturities are in 2024 and beyond. My question is, you do have some 2022 maturities. You've got some time on those, but what is the general thoughts on addressing those? Do you issue new debt to term those out, or where's your head today in terms of those maturities?

Well, while you were talking to Lee, Gail asked that question, and David answered it. But because you're a nice guy, Rune, we'll answer for you again. So, David, tell them one more time.

Yeah, Rune. Obviously, we have like $260 million coming due in June of 22 and $320 million or so in December. So it's certainly on the front of our minds. As you know, we obviously watch the market on a regular basis. Thank you very much. We still want to see how that plays out. We watch it. We're always prepared to go if and when necessary and if and when the market sort of moves in our favor. We feel like we do have that opportunity if we need to. We have about a year and a half now before that next maturity. So we're watching it. We look at it. And frankly, if it doesn't ever become attractive to us over the next 18 months, we do have significant availability, obviously, on the revolver to do something of a temporary nature, if you will. And then as we get into a different environment, Roger mentioned, as you get out past 2022 particularly, our CapEx numbers decline in a big way. And as such, it frees up a lot of cash flow to pay off some of these bonds if, in fact, we need to do it at that time. So we look at it regularly, consistently, and I feel like we have a full complement of opportunities to take advantage of it.

Also, I think it's important that the separation of the notes due in the middle of the year and end of the year in a post-COVID world, six months is a lifetime, Maroon, as you know. So I think that's also positive. It's not like it's due in the middle of the year. So that's almost two years away, over two years away for the second note, which at first can easily replace a revolver. And the key for us is to keep our revolver empty. and when you do that you can get another one very easily. Also keep in mind Murphy where we are. We have an unsecured revolver. We've never had a security of any type of revolving correct facility in our company history nor an RBL and enormous flexibility from Murphy on our liquidity and our revolving situation and our long-term positivity in the market around bonds and the deals that we've had in the past.

Got it, Roger. Thanks for that. As a Longhorn, I guess that serves me right for getting on Lee's call first. So anyways, thanks for your comments.

No problem, Arun. I'll talk to you soon. Appreciate you.

Thanks.

There are no further questions from our phone lines. I would now like to turn the call back over to Roger Jenkins for closing, any closing comments.

Appreciate everyone calling in today. We'll see you at our next call in late January. Thanks for everything. See you soon. Take care.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.